Corporate Information
The accompanying financial statements comprise the financial statements of IPOWER SOLUTIONS INDIA
LIMITED (the Company). The Company is a public limited Company domiciled in India and is
incorporated under the provisions of the Companies Act applicable in India. The registered office of the
Company is located at Chennai, India.
Basis of preparation of Financial Statements:
The Standalone financial statements are prepared in accordance with Indian Accounting Standard (Ind
AS), under the historical cost convention on accrual basis, except for certain financial instruments which
are measured at fair values, the provisions of the Companies Act, 2013 (''the Act'') and guidelines issued
by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the
Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant
amendment rules issued thereafter.
The standalone financial statements have been prepared on the historical cost basis, except for the
following assets and liabilities which have been measured at fair values:
Ý Derivative Financial Instruments
Ý Certain financial assets measured at fair value (refer accounting policy regarding financial
instruments).
In addition, the carrying values of assets and liabilities designated as hedged items are recognized at fair
value.
The standalone financial statements are presented in INR (^) and all the values are rounded off to the
nearest rupees except when otherwise indicated.
Use of Estimates, Assumptions And ludgements
The preparation of the standalone financial statements in conformity with Ind AS requires the
management to make estimates, judgements and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities on the date of the standalone financial
statements and the reported amounts of revenues and expenses for the year reported. Actual results
could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and
future periods are affected.
Key source of estimation of uncertainty as at the date of standalone financial statements, which may
cause a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, is in respect of the following :
• Revenue recognition
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts.
Use of the percentage-of completion method requires the Company to estimate the efforts or costs
expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended
have been used to measure progress towards completion as there is a direct relationship between
input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded
in the period in which such losses become probable based on the expected contract estimates at the
reporting date.
• Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value
less costs of disposal calculation is based on available data from binding sales transactions, conducted
at arm's length, for similar assets or observable market prices less incremental costs for disposing of
the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the
forecast for future years. These do not include restructuring activities that the Company is not yet
committed to or significant future investments that will enhance the asset's performance of the C GU
being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well
as the expected future cash-inflows and the growth rate used for extrapolation purposes. These
estimates are most relevant to other intangibles with indefinite useful lives recognized by the
Company.
• Share-based payments
Estimating fair value for share-based payment transactions requires determination of the most
appropriate valuation model, which is dependent on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs to the valuation model including
the expected life of the share option, volatility and dividend yield and making assumptions about
them.
• Taxes
The Company's major tax jurisdictions is in India. Significant judgments are involved in determining
the provision for income taxes and tax credits, including the amount expected to be paid or refunded.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that future
taxable profit will be available against which the losses can be utilized.
Significant management judgement is required to determine the amount of deferred tax assets that
can be recognized, based upon the likely timing and the level of future taxable profits together with
future tax planning strategies.
• Defined Benefit Plans
The cost of the defined benefit gratuity plan and other post-employment benefits and the present
value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the future.
• Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot
be measured based on quoted prices in active markets, their fair value is measured using internal
valuation techniques. The inputs to these models are taken from observable markets where possible,
but where this is not feasible, a degree of judgement is required in establishing fair values.
Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes
in assumptions about these factors could affect the reported fair value of financial instruments.
• Intangible assets under development
The Company capitalizes intangible asset under development in accordance with the accounting
policy. Initial capitalization of costs is based on management's judgement that technological and
economic feasibility is confirmed. This is done when a product development project has reached a
defined milestone according to an established project management model. In determining the
amounts to be capitalized, management makes assumptions regarding the expected future cash
generation, discount rates to be applied and the expected tenure of benefits.
Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, considering
contractually defined terms of payment.
Goods and Service Tax (“GST”) is not received by the Company on its own account. Rather, it is tax
collected on value added to the commodity/service rendered by the seller on behalf of the government.
Accordingly, it is excluded from revenue.
The Company derives its revenues primarily from software services & projects as well as other allied
services.
Revenues from software services & projects comprise income from time-and-material and fixed price
contracts. Revenue from time and material contracts is recognized when the services are rendered in
accordance with the terms of contracts with clients.
Revenue from fixed price contracts is recognized using the percentage-of-completion method, calculated
as the proportion of the cost of effort incurred up to the reporting date to estimated cost of total effort.
Revenue from sale of services is shown as net of applicable discounts and pricing incentives to customer.
Revenue is recognised only when evidence of an arrangement is obtained and the other criteria to
support revenue recognition are met, including the price is fixed or determinable, services have been
rendered, the cost incurred and cost to complete the transaction can be measured reliably and
collectability of the resulting receivables is probable.
Provisions for estimated losses on incomplete contracts are recorded in the year in which such losses
become probable based on the current contract estimates.
Unbilled revenue represents revenues in excess of amounts billed to clients as at the balance sheet date.
Unearned revenue represent billings in excess of revenues recognized.
Advances received for services are reported as liabilities until all conditions for revenue recognition are
met.
Interest income is recognized as it accrues in the statement of profit and loss using effective interest rate
method.
Dividend income is recognized when the right to receive the dividend is established.
Property. Plant and Equipment and Intangible assets
Property, plant and equipment are stated at the cost of acquisition or construction less accumulated
depreciation and write down for, impairment if any. Direct costs are capitalised until the assets are ready
to be put to use. When significant parts of plant and equipment are required to be replaced at intervals,
the Company depreciates them separately based on their specific useful lives.
All other repair and maintenance costs are recognised in the statement of profit or loss as incurred.
Property, plant and equipment purchased in foreign currency are recorded at cost, based on the exchange
rate on the date of purchase.
The Company identifies and determines cost of each component/ part of Property, plant and equipment
separately, if the component/ part has a cost which is significant to the total cost of the Property, plant
and equipment and has a useful life that is materially different from that of the remaining asset.
Intangible assets purchased or acquired in business combination, are measured at cost or fair value as of
the date of acquisition, as applicable, less accumulated amortisation and accumulated impairment, if any.
The amortization period and the amortization method are reviewed at least at each financial year end.
Internally developed intangible assets are stated at cost that can be measured reliably during the
development phase and capitalised when it is probable that future economic benefits that are attributable
to the assets will flow to the Company.
Gains or losses arising from de-recognition of Property, plant and equipment are measured as the
difference between the net disposal proceeds and the carrying amount of Property, plant and equipment
and are recognized in the statement of profit and loss when the Property, plant and equipment is
derecognized.
Cost of assets not ready for use at the balance sheet date are disclosed under capital work-in-progress.
Depreciation And Amortisation
Depreciation on Property, plant and equipment is calculated on a straight-line basis using the rates
arrived at, based on the useful lives estimated by the management. Intangible assets are amortised on a
straight- line basis over the estimated useful economic life.
Leases
Effective April 1, 2019, the Company has applied Ind AS 116 using the modified retrospective approach
and therefore the comparative information has not been restated and continues to be reported under Ind
AS 17.
For contracts entered into or changed, on or after April 1, 2019, the Company assesses whether a contract
is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Company assesses whether:
• the contract involves the use of an identified asset;
• the Company has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use; and
• the Company has the right to direct the use of the asset.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices.
However, for the leases of land and buildings in which it is a lessee, the Company has elected not to
separate non-lease components and account for the lease and non-lease components as a single lease
component.
For contracts entered into before April 1, 2019, the Company determined whether the arrangement was
or contained a lease based on the assessment of whether:
• fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
• the arrangement had conveyed a right to use the asset.
Company as a lessee
The Company recognises a Right-of-use Asset and a Lease Liability at the lease commencement date. The
Right-of-use Asset is initially measured at cost, which comprises the initial amount of the Lease Liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives received.
The Right-of-use Asset is subsequently depreciated using the straight-line method from the
commencement date to the earlier of the end of the useful life of the Right-of-use Asset or the end of the
lease term. The estimated useful lives of Right-of-use Assets are determined on the same basis as those of
Property, Plant and Equipment. In addition, the Right-of-use Asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the Lease Liability.
The Lease Liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Company's incremental borrowing rate. Generally, the Company uses its
incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the Lease Liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Company is reasonably certain not to
terminate early.
The Lease Liability is measured at amortised cost using the Effective Interest Rate method (EIR). It is
remeasured when there is a change in future lease payments arising from a change in an index or rate, if
there is a change in the Company's estimate of the amount expected to be payable under a residual value
guarantee or if the Company changes its assessment of whether it will exercise a purchase, extension or
termination option.
In certain Agreements under Lease where the annual rental payments under lease are nominal, the
company has decided not calculate its Present value using EIR method. The company recognises such
payments in Statement of Profit and Loss.
When the Lease Liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the Right-of-use Asset, or is recorded in Statement of Profit and Loss if the carrying amount of
the Right-of-use Asset has been reduced to zero.
The Company presents Right-of-use Assets that do not meet the definition of investment property and
Lease Liabilities as a separate line item on the face of the Balance Sheet.
Short-term leases and leases of low-value assets: The Company has elected not to recognise Right-of-use
Assets and Lease Liabilities for short-term leases that have a lease term of 12 months or less and leases of
low-value assets. The Company recognises the lease payments associated with these leases as an expense
on a straight-line basis over the lease term.
Company as a lessor
Lease income from operating leases where the Company is a lessor is recognised in income on a straight¬
line basis over the lease term unless the receipts are structured to increase in line with expected general
inflation to compensate for the expected inflationary cost increases. The respective Leased Assets are
included in the Balance Sheet based on their nature.
Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the
arrangement of borrowings and exchange differences arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
Impairment :
a) Financial Assets (Other Than At Fair Value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial
assets is impaired. Ind AS 109 ('Financial Instruments') requires expected credit losses to be
measured through a loss allowance. The Company recognises lifetime expected losses for all
contract assets and / or all trade receivables that do not constitute a financing transaction. For all
other financial assets, expected credit losses are measured at an amount equal to the 12-month
expected credit losses or at an amount equal to the life time expected credit losses if the credit risk
on the financial asset has increased significantly since initial recognition. The Company provides for
impairment upon the occurrence of the triggering event. As per the policy, The Company provides
for impairment of trade receivables (other than intercompany receivables) outstanding more than
180 days from the date they are due for payment.
b) Non-Financial Assets
Tangible And Intangible Assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability
whenever there is any indication that their carrying amounts may not be recoverable. If any such
indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis unless the asset does not generate cash flows that
are largely independent of those from other assets. In such cases, the recoverable amount is
determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is
recognised in the statement of profit and loss.
Retirement And Other Employee Benefits
Gratuity, which is a defined benefit plan, is accrued based on an independent actuarial valuation,
which is done based on project unit credit method as at the balance sheet date. The Company
recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
Gains and losses through re-measurements of the net defined benefit liability/(asset) are
recognized in other comprehensive income. In accordance with Ind AS, re-measurement gains and
losses on defined benefit plans recognized in OCI are not to be subsequently reclassified to
statement of profit and loss. As required under Ind AS compliant Schedule III, the Company
transfers it immediately to retained earnings.
The cost of Short-term compensated absences is provided for based on estimates. Long term
compensated absence costs are provided for based on actuarial valuation using the project unit
credit method. The Company presents the entire leave as a current liability in the balance sheet,
since it does not have an unconditional right to defer its settlement for 12 months after the
reporting date.
Contributions payable to recognized provident funds, which are defined contribution schemes, are
charged to the statement of profit and loss.
During the Financial Year, the Company has not made any provision towards Gratuity and Leave
Encashment as it has engaged only part-time staff members, who are not eligible for such benefits
under the applicable laws and terms of employment. The engagement of part-time personnel is due
to the minimal scale of operations currently undertaken by the Company.
Share Based Payments
The Company measures compensation cost relating to share-based payments using the fair valuation
method in accordance with Ind AS 102 Share-Based Payment. Compensation expense is amortized over
the vesting period of the option on a straight line basis. The cost of equity-settled transactions is
determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in
equity, over the period in which the performance and/or service conditions are fulfilled in employee
benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has expired and the Company's
best estimate of the number of equity instruments that will ultimately vest.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of
diluted earnings per share.
Foreign Currencies
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction.
Foreign currency denominated monetary assets and liabilities are restated into the functional currency
using exchange rates prevailing on the balance sheet date.
Gains and losses arising on settlement and restatement of foreign currency denominated monetary assets
and liabilities are included in the statement of profit and loss.
The Company's financial statements are presented in INR. The Company determines the functional
currency as INR on the basis of primary economic environment in which the entity operates.
Income Taxes
Income tax expense comprises current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred tax are recognised in the statement of profit and loss,
except when they relate to items that are recognised in other comprehensive income or directly in equity,
in which case, the current and deferred tax are also recognised in other comprehensive income or directly
in equity, respectively.
Current Income Tax
Current income tax for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based on the taxable income for that period. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted by the balance sheet date.
Deferred Income Tax
Deferred income tax is recognised using the balance sheet approach. Deferred tax is recognized on
temporary differences at the balance sheet date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes, except when the deferred income tax
arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a
business combination and affects neither accounting nor taxable profit or loss at the time of the
transaction.
Deferred income tax assets are recognized for all deductible temporary differences, carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilized.
Deferred income taxes are not provided on the undistributed earnings of branches where it is
expected that the earnings of the branch will not be distributed in the foreseeable future.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the balance sheet date.
Deferred tax assets include Minimum Alternative Tax ('MAT') paid in accordance with the tax laws
in India, which is likely to give future economic benefits in the form of availability of set off against
future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet
when the asset can be measured reliably and it is probable that the future economic benefit
associated with the asset will be realized.
|